Rates see a large rally despite some still robust data prints, with attention turning to payrolls and Powell next week
MNI (LONDON) - Executive Summary
- Core PCE inflation was as expected in October, but in doing so leaves it broadly on track to overshoot the median FOMC forecast for Q4 made back in September whilst supercore has stabilized closer to 3%.
- Initial jobless claims continue to look particularly healthy although firms have further cooled their re-hiring activity. Latest indicators point to only a gradual moderation in the labor market.
- Real GDP growth was unrevised at 2.8% annualized in Q3. Domestic demand contributions were revised down a touch and real GDI was softer at 2.2% but growth broadly remains robust.
- President-elect Trump picking Scott Bessent as Treasury Secretary has seen expectations of a more gradual approach to trade policy. Trump’s subsequent threat of 25% tariffs on Canada and Mexico and an additional 10% on China has reminded of the threat here but early bilateral talks appear to have gone well.
- This political backdrop has helped support a significant rally in fixed income, with the Fed rate path falling back from cycle highs in the process, although the US Thanksgiving holiday could have distorted moves.
- Next week sees payrolls headline but also with appearances from the Fed’s Powell, Waller and Williams plus other important data such as ISM services.
- The market prices 16.5bp of cuts for the Dec 18 FOMC decision vs a 50/50 call between pausing and another 25bp cut as of last Friday.
PLEASE SEE THE FULL REPORT HERE: US week in macro_241129.pdf
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